This piece is published by Policy in cooperation with Carleton University’s Norman Paterson School of International Affairs as part of our Emerging Voices program, which provides an editorial platform for outstanding students.

Anthony Galipeau

June 10, 2022

A successful commercial Indo-Pacific Strategy for Canada should be measured not by the number of trade agreements we sign but by the steps we take to improve Canada’s internal capacity to trade with the region. This is not to say ratification of trade agreements is unimportant. Canada’s commercial presence in the region, notably anchored through the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and exploratory negotiations with potential partners like Indonesia, India, and the Association of Southeast Asian Nations (ASEAN) all serve as important indicators for the future success of a commercial Indo-Pacific strategy. However, even the promise of the most Canada-friendly FTA will come to nothing if goods cannot clear Canadian ports or skilled workers in critical sectors are denied entry at the border.

The push for the prioritization of capacity building rests on the Japanese principle of nemawashi, a process referring to the importance of laying the foundations for success and engaging critical stakeholders before securing agreements with potential trading partners. It may sound counterintuitive to focus an Indo-Pacific commercial strategy on Canadian infrastructure and staffing policy, but few things will be more vital to its success than this. The development of stronger commercial links and market opportunities will be thwarted without an equally impressive bolstering of trade commissioner cohorts in the Indo-Pacific region and port capacity at home. Canada will pass up an opportunity to become a more vital partner in the region if it eschews becoming a reliable energy supplier.

What is the Canadian commercial interest in the Indo-Pacific? We need not look further than the mandate letter addressed to Canada’s trade minister. Mary Ng, to answer these questions. Securing new trade and investment deals and building upon our economic engagement in the Indo-Pacific are essential priorities within that mandate letter. The highlighting of the Indo-Pacific in the letter indicates that the government of Canada is aware, at least, of the region’s commercial importance. Pressingly, Canada risks being relegated to a marginal commercial player in a region that contains two of the world’s major powers (China and India), coupled with some of the fastest-growing economies in the world and an ever-larger share of the world’s population (4.3 billion people, or about 60 percent of the global population).

The risks of being marginalized in the region have only become more apparent with recent events. The January 2022 entry into force of the Regional Comprehensive Economic Pact (RCEP), a 15-member commercial agreement, threatens to minimize the impact of the CPTPP. RCEP not only counts China as a party to the agreement, but several CPTPP signatories have also become parties, including Singapore, Japan, South Korea, and Australia. There is an acute danger that CPTPP and RCEP signatories will use the latter’s FTA preferences to deepen commercial ties, further diminishing the CPTPP’s value against RCEP, an agreement whose parties account for 30 percent of global GDP. Moreover, the United States has signalled that it will not accede to the CPTPP and will instead pursue its own trade framework in the Indo-Pacific. These risks merit a comprehensive Canadian Indo-Pacific commercial strategy, but the strategy cannot be realized without a commitment to substantial domestic policy initiatives.

Without the infrastructure to handle an enhanced trading relationship with the region, robust Canada/Indo-Pacific trade ambitions will be undercut by the realities of constrained supply chains. Moreover, taking these steps is a trust-building exercise with Indo-Pacific partners. It signals that they will have pride of place in Canada’s global commercial relationships. And it provides foreign importers and exporters in the region more incentives to funnel their trade toward Canada.

Essential to capacity building is substantially upgraded shipping terminal capacity for Canada’s west-coast ports. The Port of Vancouver has long been the western point of departure and entry for cargo entering or leaving Canada. Despite the port’s prominence, there are worrisome trends that could compromise its efficacy. The Vancouver Fraser Port Authority CEO, Robin Silvester, has noted the Port will likely suffer congestion and supply chain problems as early as 2025. Even a proposed expansion project at Roberts Bank is at risk of delay and cancellation, owing to its potential impacts on wildlife in the region.

It cannot be overstated how many capacity improvements should be at the centre of an Indo-Pacific commercial strategy. In a worst-case scenario, constrained capacity would harm relations with potential Indo-Pacific partners and port traffic from the United States that passes through. By failing to commit to capacity improvements, the federal government is at risk of jeopardizing trade from both potential and current trading partners.

To this end, the federal government needs to be willing to put funding, innovation, and political backing into alternative solutions if the Roberts Bank expansion is unviable. Given the overlapping jurisdiction of the port and issues related to it, federal, provincial, municipal, and private stakeholders should be convened to secure an alternative option rapidly. An expansion of the Prince Rupert Port terminal beyond its planned upgrades may be an attractive alternative.

Even if the Roberts Bank proposal becomes viable, the federal government should be active in identifying and fast-tracking further capacity improvements in line with provincial, municipal, and private stakeholders in the region. Canada should also be willing to consider funding improvements to develop additional air traffic capacity in airports in the region.

Without the infrastructure to handle an enhanced trading relationship with the region, robust Canada/Indo-Pacific trade ambitions will be undercut by the realities of constrained supply chains. Moreover, taking these steps is a trust-building exercise with Indo-Pacific partners. It signals that they will have pride of place in Canada’s global commercial relationships.

The second internal process in which the federal government can play a role is the provision of natural resources, particularly oil and natural gas, to Indo-Pacific partners. Russia’s invasion of Ukraine has led to rising gas prices and resource shortages around the globe. It has also led to a moral dilemma for some partners in the region: whether to accept Russian oil and gas amid moral condemnation or expose themselves to the domestic backlash of power shortages and inflation costs. Canada can be a valuable partner in providing these resources to the region. However, Canada is constrained by taking advantage of these resources in two ways: the necessity of balancing resource exploitation with the risks of climate change and disputes with Indigenous peoples and climate activists over the construction of new pipelines.

Solving the current deadlock over the growth and exploitation of natural resources will not be easy. But it is not a fight that the federal government can shy away from. It should strike a balance between its willingness to assert jurisdiction and what is required to mollify domestic political stakeholders to the greatest extent possible. If this means leveraging its authority to convince contractors to build along more expensive but less politically costly paths, it should do so. The Coastal GasLink pipeline might have been built had concerns about the environmentally sensitive traditional lands of the Wet’suwet’en people and the opposition of hereditary chiefs been meaningfully resolved through free, prior, and informed consent.

Federal and provincial stakeholders need to be willing to engage in these discussions beforehand and provide private stakeholders with proper guidance on how to conduct negotiations with Indigenous peoples. Such advice includes prioritizing Indigenous ownership and equity when building oil and gas projects on Indigenous lands. The government should also be willing to talk with the Canadian people about the importance of oil and natural gas as transitional fuels on the path to renewable energy. These two objectives can complement rather than oppose each other, as has been successfully demonstrated in the policy of jurisdictions such as North Carolina.

Even with these caveats, Canada’s political commitments to cutting oil and gas emissions by 42 percent by 2030 and its international commitments to reduce carbon emissions under the Paris Agreement should also be weighed against supplying energy to the Indo-Pacific. On its face, committing to a policy of becoming a key supplier of oil and natural gas to the Indo-Pacific would seem to violate both of these commitments. However, it is important to note that much of the pollution that comes from oil and gas can be mitigated by cleaning up and committing to processes that reduce the environmental costs of extraction.

Another critical dimension to consider in weighing Canada’s international commitments is the current energy demand from the Indo-Pacific. It is not as if every country in the Indo-Pacific has fully transitioned to a renewable energy economy. Many still require non-renewable sources as they build capacity for renewables, and for many countries, their primary non-renewable source is coal rather than oil or gas. Coal is a far more significant pollutant than oil or natural gas and lacks the similar technological potential to limit the bulk of its emissions.

Canada should focus on people-to-people innovation exchanges in the region. The region’s competencies and capacity far outstrip Canada’s own in many areas, such as the digital economy.

By providing oil and natural gas to Indo-Pacific countries that are currently using coal as their primary non-renewable source of energy, Canada can make the case that it is helping to reduce emissions while guaranteeing a stable energy supply to the region. This should not be treated as a marginal impact: even with the growth and reduced cost of renewable energy sources, the share of coal as a non-renewable source of energy in the Indo-Pacific is expected to grow with demographic and economic demands. In the absence of a Canadian guarantee on energy security, the goals of the Paris Agreement may become far harder to meet.

Becoming a reliable supplier of energy to the Indo-Pacific brings commercial benefits. It brings normative benefits as well. In the absence of reliable liberal democratic powers to deliver essential goods such as energy supply, many Indo-Pacific nations will need to choose between liberal democratic values and critical resources held by authoritarian countries in future crises. With Canada willing and able to develop and deliver oil, natural gas, and uranium, this circle can be squared.

As a final note on building nemawashi, Canada should focus on people-to-people innovation exchanges in the region. The region’s competencies and capacity far outstrip Canada’s own in many areas, such as the digital economy. Recruiting experienced people in these areas will be critical for Canada’s commercial interests in the region and globally. This could include supporting more exchanges of talent at the academic level, allowing a greater flow of subject matter experts into Canada to build innovative capacity and collaboration for complementary government agencies from country to country.

greater flow of subject matter experts into Canada to build innovative capacity and collaboration for complementary government agencies from country to country.

This is not to discount the importance of engaging with Indo-Pacific partners to secure trade arrangements. An Indo-Pacific strategy is impossible to achieve without efforts towards engaging partners, both actual and potential, in the Indo-Pacific. Canada’s exploratory negotiations with Indonesia, India, and ASEAN are essential, and their successful conclusion will be integral to building a substantial Canadian commercial presence in the Indo-Pacific. Canada’s relationship with China is also a necessary part of an Indo-Pacific commercial strategy to consider. It will involve managing worsening bilateral relations, national security considerations, and the question of how to maintain a still-substantial commercial relationship (valued at $114.1 billion in 2021).

However, to achieve the ambitious promise of a fully realized Indo-Pacific commercial strategy, Canada itself needs to be capable of handling those presumed successes. The pathway towards a successful Indo-Pacific commercial relationship should not only be measured by signed agreements. It should be measured by each port built and approved permit to allow goods, services, and skilled workers to bolster the domestic economy and regional ties.

Anthony Galipeau is currently pursuing a master’s degree in International Affairs at Carleton University.